Sorry. But I don't buy the poster's logic in here.
Everything you buy with a warranty includes the cost of the warranty in the purchase price. It is the same faulty logic of people not using the health care they get as part of their compensation. If your company stopped providing health care they had previously, they should give you a raise in order to make it fair. The health care is being paid for by the worker.
Same thing with any item with a warranty. If it comes with a warranty, the company has already run a regression figuring out the failure rate, the chance of return, and put that into the cost of the item.
He used supposedly factory ammo. S&W should be taking care of it. If not their fault, they should at least be contacting the main stream ammo manufacture for the buyer.
I would call and ask for a manager.
(all assuming the ammo is regular stuff)
Do you read warranty agreements? You understand that almost every warranty ever created is for a limited time, and only covers manufacturing defects (that the law of averages says will happen, if you make enough products). If what you're saying is correct, I should be able to crash my car into a light pole, and the manufacturer should replace it. But that's not the case. Warranties ONLY cover problems that are specifically the fault of the manufacturer, and even then, only under certain circumstances.
S&W is under no obligation, warranty or not, to do ANYTHING for the OP. The problem wasn't their fault. The fact that they're offering a replacement at dealer cost shows they're going above and beyond, and that they care about the customer.